Saturday, September 25, 2010

Update on the NYC "Taxi Cartel"; Medallion Prices Reach Record Highs in Aug. of $609k and $825k

The "priciest piece of aluminum in NYC" - a taxi medallion to operate a single cab in NYC - reached a new record-high of $609,000 in August for an individual medallion (see chart above, data here), more than double the average prices in 2004. The average price for a corporate-owned taxi medallion reached a new record high in July and August at $825,000.

Membership in the "taxi cartel" certainly has its privileges: above-market returns of 17% per year for corporate medallions and 15% for individual medallions in a permanent bull market. Over the same period from 2004 to 2010, the average annual return on the S&P500 was -1.10%. See previous CD posts here, here and here.

5 Comments:

One of my most vivid memories of NYC is looking down at the streets around Times Square and seeing a sea of yellow taxis. If a medallion is $825k then even a short taxi ride must be very costly. I wonder of that sea of yellow has receded over time with the outrageous cost of entry?

Juandos, the flat rate fares are very good and about what i pay from the airport to my house in a shared van (SEA to near downtown Seattle). The non-flat NY taxi fares are very complicated and so I am not sure if they are expensive. How do they make any money on the flat fares with the high cost of entry?

Well from some of my brief experiences in New York city I know that medallion holders may or may not drive their vehicles but the do lease them out and those cars are on the street almost 24 hours a day, seven days a week...

I also noticed that in Manhattan there's lots of very short trips, sometimes only two or three blocks depending on the weather...

So when you consider the initial charge, the fifth mile rates, and the surcharges, there's some potential there to garner a lot of bucks...